Universal Basis of Bank Failure – The Nigeria Case

Abstract

Many nations have experienced bank failures with very high costs which can lead to systemic risks. The causes of bank failure are numerous, in theory, and include regulation of banking activities such as forbearance; asymmetric information leading to a moral hazard problem and connected lending. The history of banking system in Nigerian has been occasioned with a lot of problem which resulted to distress. The recent consolidation and recapitalisation exercise in the sector was in a bid to resolve this dilemma. In this paper we appraised the causes and outcomes of bank failures. In this article, we looked at the theoretical level and other root causes, consequences of bank failure and lessons within the Nigeria perspective. Finally, the options and measures to prevent further systemic hazards were recommended.

Keyword: bank failure, Nigeria, mismanagement, corruption.